Correlation Between Bank Mandiri and First Watch

Can any of the company-specific risk be diversified away by investing in both Bank Mandiri and First Watch at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank Mandiri and First Watch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Mandiri Persero and First Watch Restaurant, you can compare the effects of market volatilities on Bank Mandiri and First Watch and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank Mandiri with a short position of First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Mandiri and First Watch.

Diversification Opportunities for Bank Mandiri and First Watch

0.27

Correlation Coefficient

Bank Mandiri  First Watch

Modest diversification

The 3 months correlation between Bank and First is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank Mandiri Persero and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant and Bank Mandiri is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank Mandiri Persero are associated (or correlated) with First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Bank Mandiri i.e., Bank Mandiri and First Watch go up and down completely randomly.

Pair Corralation between Bank Mandiri and First Watch

Assuming the 90 days horizon Bank Mandiri Persero is expected to under-perform the First Watch. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Mandiri Persero is 1.05 times less risky than First Watch. The pink sheet trades about -0.04 of its potential returns per unit of risk. The First Watch Restaurant is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,853  in First Watch Restaurant on December 28, 2024 and sell it today you would lose (96.00) from holding First Watch Restaurant or give up 5.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bank Mandiri Persero  vs.  First Watch Restaurant

Bank Mandiri Persero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Mandiri Persero has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Watch Restaurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Watch Restaurant has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Watch is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank Mandiri and First Watch

The main advantage of trading using opposite Bank Mandiri and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Mandiri position performs unexpectedly, First Watch can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Watch will offset losses from the drop in First Watch's long position.

The idea behind Bank Mandiri Persero and First Watch Restaurant pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.